Several months back we were all preparing for some major modifications in withholding. Yet it turns out that the massive changes that the Federal Government was preparing in W-4 withholding for 2019 are not going to happen after all, at least not right away.

Thanks to considerable input from payroll and tax professionals nationwide, it turns out that the Treasury Department and the IRS have postponed the release of considerable changes in withholding scheduled for the 2019 tax year. Those changes were scheduled to be released in the fall of 2018. As a result of the government’s decision, the 2019 W-4 will be consistent with the 2018 W-4 — with a few minor adjustments for inflation. Instead of the advertised changes for 2019 W-4, the IRS is in the process of making more considerable adjustments for 2020 W-4; these changes will more accurately reflect alterations in the new tax law. Until the new changes are released, the IRS urges taxpayers to double-check their withholding to make sure that the withholding is not too much or too little.

In order for employees to determine the proper withholding, the IRS has published an early draft of the 2019 Form W-4, Employee’s Withholding Allowance Certificate, along with instructions. You know how the system works: Employers rely on the W-4 to withhold the proper amount of federal income tax from their employees’ paychecks. It’s recommended that employees provide a new W-4 each year, or whenever their personal or financial situations differ from the previous year.

With the delay in changes to the W-4, it’s anticipated that the IRS will release an updated version of their early draft; look for it by August or September 2019. The IRS usually makes minor changes to first-draft forms and instructions when the final edition is ultimately released. This IRS early draft was published to generate feedback from tax professionals and employers; a 30-day comment period will be extended to July 7, 2019. Depending upon the comments, taxpayers might expect additional extensive changes to the W-4 form and instructions than is typically seen in any given tax year.

What should employers do? Here are a few things to put on your front burner — even though the IRS has put off changes in withholding in 2019:

  • Hold off on submitting and processing a new Form W-4 for 2019, and wait for
    guidance from the IRS regarding new withholding rules
  • Adhere to the new regulations, and provide the new 2019 W-4 — even though the
    IRS does not as yet require adopting the new forms
  • Adjust withholding appropriately for each employee who elects to complete the
    new Form W-4
  • Be alert for the final withholding structure and Form W-4 for 2019; be sure your
    payroll system can support these new requirements
  • Keep a watchful eye on state actions. Many states rely on the federal tax code as a
    guide for tax liability. Considering major changes to the federal tax withholding
    structure are imminent, it’s up to the states to determine how closely they adhere
    to federal guidelines.

Please stay tuned for additional information regarding the 2019 W-4 form as it becomes available. As always, should you have any questions concerning these changes in withholding, you should contact your tax professional.

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